Comments

Market Update

US tsys continuing higher after Trump’s new round of China tariffs, and China’s pledge to retaliate, the US 10Y 1.86% (-3.5bps), lowest since Nov 2016.  Long term bunds at new low yields with the 10Y bund -0.50% and the 30Y at zero for the first time.  July Non farm payrolls expected at 165k vs 224k with the unemployment rate forecast to fall further to 3.6%, a new low. GOCs lagging tsys  by 5-7bps since yesterday’s rally, 10Y 1.39%. Trade data for June expected to show reversal to a $300mln deficit from the $760mln surplus recorded in May. CAD weaker for a 3rd day, 1.3245 in the wake of broad based strength in the USD, weakness in commodities, thou crude has rebounded somewhat from yesterday’s huge losses.

News headlines

Stocks Slump, Bonds Rally as Trade Tensions Rise: Markets Wrap (Bloomberg) Stocks slumped and bonds rallied in the wake of President Donald Trump’s move to escalate the trade war, with China pledging “countermeasures” if the U.S. steps up tariffs on its goods.

TSX futures set to open lower on fresh Trump tariff threat (Reuters) Stock futures pointed to a lower opening for Canada’s main stock index on Friday after U.S. President Donald Trump rattled global markets with fresh tariff threats on China.

Oil Set for Weekly Loss After Biggest Slump in 4 Years on Tariff (Bloomberg) Oil is set for a weekly loss after the steepest one-day drop in more than four years as U.S. President Donald Trump abruptly escalated the trade war with China, deepening concerns over slowing growth.

China pledges countermeasures as Trump escalates trade war again (BNN) Beijing pledged to respond if the U.S. insists on adding extra tariffs to the remainder of Chinese imports, after President Donald Trump’s abrupt escalation of the trade war.

U.S. pulls out of Soviet-era nuclear missile pact with Russia (Reuters) The United States formally withdrew from a landmark nuclear missile pact with Russia on Friday after determining that Moscow was in violation of the treaty, something the Kremlin has repeatedly denied.

Fed, trade confusion upending Wall Street investment playbooks (Reuters) As Federal Reserve Chair Jerome Powell on Wednesday described why the central bank’s interest rate cut should not be seen as the start of a lengthy easing cycle, the U.S. stock market was losing value at a rate of over $25 billion a minute.

U.S. employment growth seen slowing in July; wage gains steady (Reuters) U.S. job growth likely slowed in July after outsized gains in the prior month, with wages probably maintaining their moderate pace of increase, which could boost market expectations for another interest rate cut from the Federal Reserve next month.

Entire German govt bond yield curve turns negative for first time (Reuters) The 30-year German government bond yield turned negative for the first time ever on Friday, leaving the euro zone member’s entire yield curve in negative territory as investors scrambled for safer assets.

Market Overview: US 10yr note futures are up 0.182% at 128-30, S&P 500 futures are down -0.36% at 2941.5, Crude oil futures are up 2.56% at $55.33, Gold futures are up 1.22% at $1449.9, DXY is down -0.18% at 98.196, CAD/USD is up 0.07% at 0.7564.

Cda Benchmarks	Yield	Tsy Benchmarks	Yield
2 Year	1.466%	2 Year	1.71%
5 Year	1.358%	5 Year	1.657%
10 Year	1.385%	10 Year	1.855%
30 Year	1.615%	30 Year	2.395%

US Economic Data

08:30 AM	Change in Nonfarm Payrolls, Jul  Survey: 165k  Prior: 224k
	Change in Private Payrolls, Jul  Survey: 165k  Prior: 191k
	Change in Manufact. Payrolls, Jul  Survey: 5k  Prior: 17k
	Unemployment Rate, Jul  Survey: 3.60%  Prior: 3.70%
	Average Hourly Earnings MoM, Jul  Survey: 0.20%  Prior: 0.20%
	Average Hourly Earnings YoY, Jul  Survey: 3.10%  Prior: 3.10%
	Trade Balance, Jun  Survey: -$54.6b  Prior: -$55.5b
10:00 AM	Factory Orders, Jun  Survey: 0.70%  Prior: -0.70%
	Durable Goods Orders, Jun F  Survey: —  Prior: 2.00%
	Durables Ex Transportation, Jun F  Survey: —  Prior: 1.20%
	Cap Goods Orders Nondef Ex Air, Jun F  Survey: —  Prior: 1.90%
	Cap Goods Ship Nondef Ex Air, Jun F  Survey: —  Prior: 0.60%
	U. of Mich. Sentiment, Jul F  Survey: 98.5  Prior: 98.4

Canadian Economic Data

08:30 AM

Int’l Merchandise Trade, Jun  Survey: -0.30b  Prior: 0.76b

Disclosure and Disclaimer

The following sources of information have been, or may have been, used partially or in their entirety to compile the herein provided CTI Capital Securities Inc. (“CTI Capital”) ‘Morning Comments.’ CTI Capital believes these sources to be generally reliable, however, as said sources are varied and from third parties, CTI Capital cannot guarantee the accuracy or completeness of said information: Canadian Press (CP); Bloomberg News (BN); Wall Street Journal (WSJ); Stone & McCarthy Research Associates (SMRA); New York Times (NYT); Financial Times (FT); Market News International (MNI); Globe and Mail; Associated Press (AP); CNW Group (CNW); Reuters; Business News Network (BNN); Market Watch; and others.

Ivan Greenstein, Stephan Buu, Émile Bordeleau

Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.

Tel : (514)-861-0240
Fax: (514)-861-3230

Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilieres Inc.

Tel : (514)-861-0240
Fax: (514)-861-3230

Market Update

US tsys lower but recouping most of o/n losses, US10Y 2.02% (+1bp), strong volume in TY futures (460k). Belly of tsy curve leading slight losses after FOMC decision to lower Fed Funds 25bps without clear signal of further cuts to follow. UK going against the grain of higher global yields after BOE decision, gilts bid on Carney warning of no-deal Brexit impact on growth, GBP falling to fresh lows, Carney warning no-deal could push pound to record lows. GOCs lower, 1bp wider vs tsys, Can/US 10Y 8bps cheaper since last week, 3bps after yest stronger GDP. Today the BOC auctions $2.4bln in reopened Sep 2022s.

News headlines

Dollar Extends Post-Fed Gains; Treasuries Retreat: Markets Wrap (Bloomberg) The dollar extended an advance on Thursday and Treasuries gave back some gains from a day earlier as investors digested the first U.S. rate cut in a decade and the Federal Reserve’s message there may not be many more. S&P 500 futures edged higher and European equities rose.

TSX futures up as focus turns to earnings (Reuters) Stock futures pointed to a higher opening for Canada’s main stock index on Thursday as investors parsed through a host of major company earnings.

Mind your backs, dollar coming through! (Reuters) The dollar charged to its highest in more than two years on Thursday after the Federal Reserve spoiled hopes of a run of U.S. interest rate cuts.

Factory pain spreads through Asia, Europe; stimulus expected (Reuters) Factory activity contracted across Asia and Europe in July, fuelling worries a prolonged U.S.-China trade war and an economic slowdown could tilt the world toward recession, which central banks would have to fight with depleted ammunition.

Oil Slides as Dollar Strengthens After Fed’s Cautious Rate Cut (Bloomberg) Oil retreated from a two-week high after the Federal Reserve said its interest rate cut was an isolated move, boosting the dollar and dimming demand for commodities priced in the U.S. currency.

Powell says Fed cut not start of long series, drawing Trump ire (BNN) Federal Reserve Chairman Jerome Powell said the first interest rate cut since the financial crisis was to “insure against downside risks” but didn’t signal the start of a lengthy easing cycle, drawing a sharp rebuke from President Donald Trump.

China sees intensive contact with U.S. this month ahead of September trade talks (Reuters) Chinese and U.S. working teams will be in intensive contact this month to prepare “good groundwork” for the next round of face-to-face trade talks in September, the commerce ministry said on Thursday.

Bank of England cuts growth forecasts as Brexit and global worries mount (Reuters) The Bank of England cut its growth forecasts on Thursday in the face of increased Brexit worries and a slowing global economy, but gave no indication it was considering lowering interest rates like other central banks.

Market Overview: US 10yr note futures are down -0.098% at 127-10, S&P 500 futures are up 0.08% at 2984.75, Crude oil futures are down -1.28% at $57.83, Gold futures are down -1.47% at $1416.6, DXY is up 0.37% at 98.877, CAD/USD is up 0.24% at 0.7562.

Cda Benchmarks	Yield	Tsy Benchmarks	Yield
2 Year	1.571%	2 Year	1.888%
5 Year	1.483%	5 Year	1.855%
10 Year	1.51%	10 Year	2.04%
30 Year	1.722%	30 Year	2.54%

US Economic Data

07:30 AM	Challenger Job Cuts YoY, Jul  Survey: —  Actual: 43.20% Prior: 12.80%
08:30 AM	Initial Jobless Claims, Jul 27 Survey: 214k Actual: 215k  Prior: 206k
	Continuing Claims, Jul 20  Survey: 1674k Actual: 1699k  Prior: 1676k
09:45 AM	Bloomberg Consumer Comfort, Jul 28  Survey: —  Prior: 63.7
	Markit US Manufacturing PMI, Jul F  Survey: 50.1  Prior: 50.0
10:00 AM	ISM Manufacturing, Jul  Survey: 52.0  Prior: 51.7
	ISM Prices Paid, Jul  Survey: 49.0  Prior: 47.9
	Construction Spending MoM, Jun  Survey: 0.30%  Prior: -0.80%

Canadian Economic Data

09:30 AM

Markit Canada Manufacturing PMI, Jul  Survey: —  Prior: 49.2

Disclosure and Disclaimer

The following sources of information have been, or may have been, used partially or in their entirety to compile the herein provided CTI Capital Securities Inc. (“CTI Capital”) ‘Morning Comments.’ CTI Capital believes these sources to be generally reliable, however, as said sources are varied and from third parties, CTI Capital cannot guarantee the accuracy or completeness of said information: Canadian Press (CP); Bloomberg News (BN); Wall Street Journal (WSJ); Stone & McCarthy Research Associates (SMRA); New York Times (NYT); Financial Times (FT); Market News International (MNI); Globe and Mail; Associated Press (AP); CNW Group (CNW); Reuters; Business News Network (BNN); Market Watch; and others.

Ivan Greenstein, Stephan Buu, Émile Bordeleau

Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.

Tel : (514)-861-0240
Fax: (514)-861-3230

Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilieres Inc.

Tel : (514)-861-0240
Fax: (514)-861-3230

Market Update

US tsys mixed, curve continuing post Powell steepening with short end yields another ~1bp lower, 10Y unch @ 2.06%, moderate volume in TY futures (300k). June CPI (0.1%) and Powell testimony key events, as well as $16bln 30Y auction. Core Euro bonds sharply lower led by UK gilts (10Y +6bps) after Carney comments on no-deal Brexit, also stronger French & Italian IP data.  GOCs unch before New House Price data, 10Y 1.58%.

News headlines

Stocks Climb on Rate-Cut Bets; Dollar Declines: Markets Wrap (Bloomberg) U.S. equity futures climbed alongside stocks in Europe and Asia as investors cheered fresh signs from central bankers that rates are headed lower. Treasuries were steady, while the dollar declined.

TSX futures flat, higher oil prices limit losses (Reuters) Canada’s main stock index futures were flat on Thursday, with a rise in oil prices to a six-week high limiting losses.

Oil rises to seven-week high on gulf storm, U.S. stockpile draw (BNN) Oil extended gains after closing at a seven-week high as a third of the Gulf of Mexico’s crude output was halted by a storm and U.S. crude inventories declined more than expected.

Besting U.S. growth is Canada’s ticket to defying easing spree (BNN) The Bank of Canada’s firmly entrenched holding pattern on rates will be put to the test by the country’s ability to withstand a deceleration in the world’s largest economy and its biggest trading partner.

Risks aside, Trump’s team sees China trade stance as strength in 2020 (Reuters) As trade talks resume between China and the United States, President Donald Trump’s advisers are confident he can portray his stance against Beijing as a strength in the 2020 election, despite making concessions and having no deal in sight.

Bitcoin extends losses after Fed chief urges halt to Facebook’s crypto project (Reuters) Bitcoin dipped almost 8% on Thursday, extending losses the day after U.S. Federal Reserve Chairman Jerome Powell called for a halt to Facebook’s Libra cryptocurrency project until concerns ranging from privacy to money-laundering were addressed.

Powell Sounds Dovish Enough to Open Door for a Half-Point Cut (Bloomberg) Nothing seems likely to stop Jerome Powell from cutting interest rates later this month. Not the regional Federal Reserve presidents who want to wait, not the strongest labor market in decades, and certainly not the political shadows that hang over such a move.

Market Overview: US 10yr note futures are down -0.012% at 127-14, S&P 500 futures are up 0.22% at 3004, Crude oil futures are up 0.45% at $60.7, Gold futures are up 0.67% at $1422, DXY is down -0.23% at 96.876, CAD/USD is down -0.17% at 0.7657.

Cda Benchmarks	Yield	Tsy Benchmarks	Yield
2 Year	1.567%	2 Year	1.816%
5 Year	1.522%	5 Year	1.823%
10 Year	1.582%	10 Year	2.063%
30 Year	1.756%	30 Year	2.582%

US Economic Data

08:30 AM	CPI MoM, Jun  Survey: 0.00% Actual: 0.1% Prior: 0.10%
	CPI Ex Food and Energy MoM, Jun  Survey: 0.20% Actual: 0.3% Prior: 0.10%
	CPI YoY, Jun  Survey: 1.60% Actual: 1.6% Prior: 1.80%
	CPI Ex Food and Energy YoY, Jun  Survey: 2.00% Actual: 2.1%  Prior: 2.00%
	CPI Core Index SA, Jun  Survey: 262.564 Actual:262.803 Prior: 262.032
	Initial Jobless Claims, Jul 6  Survey: 221k Actual: 209k Prior: 221k
	CPI Index NSA, Jun  Survey: 256.092 Actual: 256.143 Prior: 256.092
	Continuing Claims, Jun 29  Survey: 1683k Actual:1723k Prior: 1686k
	Real Avg Hourly Earning YoY, Jun  Survey: — Actual: 1.5%  Prior: 1.30%
	Real Avg Weekly Earnings YoY, Jun  Survey: — Actual 1.2% Prior: 1.00%
09:45 AM	Bloomberg Consumer Comfort, Jul 7  Survey: —  Prior: 62.6
02:00 PM	Monthly Budget Statement, Jun  Survey: -$7.9b  Prior: -$74.9b

Canadian Economic Data

08:30 AM	New Housing Price Index MoM, May  Survey: 0.10%  Actual: -0.1 Prior: 0.00%
	New Housing Price Index YoY, May  Survey: 0.20% Actual:0.0% Prior: 0.10%

Disclosure and Disclaimer

The following sources of information have been, or may have been, used partially or in their entirety to compile the herein provided CTI Capital Securities Inc. (“CTI Capital”) ‘Morning Comments.’ CTI Capital believes these sources to be generally reliable, however, as said sources are varied and from third parties, CTI Capital cannot guarantee the accuracy or completeness of said information: Canadian Press (CP); Bloomberg News (BN); Wall Street Journal (WSJ); Stone & McCarthy Research Associates (SMRA); New York Times (NYT); Financial Times (FT); Market News International (MNI); Globe and Mail; Associated Press (AP); CNW Group (CNW); Reuters; Business News Network (BNN); Market Watch; and others.

Ivan Greenstein, Stephan Buu, Émile Bordeleau

Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.

Tel : (514)-861-0240
Fax: (514)-861-3230

Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilieres Inc.

Tel : (514)-861-0240
Fax: (514)-861-3230